Source: Congressional Budget Office

Source: Congressional Budget Office

Yesterday, Trump unveiled a single piece of paper “detailing” his tax proposals.  There are no bills or resolutions or research to back any of it up or flesh it out.  So when and how any of this will ultimately be turned into actionable policy is, like the man himself, anyone’s guess.  Color me shocked.

It starts by highlighting how he wants to simplify the individual tax code and make filing taxes easier (and ends with how he wants to line his own pockets and balloon the deficit).  I don’t know about you, but it’s been my experience that when someone tells me they want to make something easier, I’m usually worse off. This proposal doesn’t disappoint.

As I’m sure you’ve read by now, all deductions would be eliminated except mortgage interest and charitable deductions. “Whew” you think.  Well, not so fast.  Property taxes would no longer be deductible.

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Rep. Diego Bernal

If you want to see the temperature rise in a roomful of Realtors, just say the words, “mandatory sales price disclosure.” The topic provides for heated discussion – as does any mention of property taxes, these days. But State Rep. Diego M. Bernal (D-San Antonio) introduced two pieces of mandatory disclosure legislation this session, which may, in the end, give us something to agree on.

One bill, HB 379, calls for mandatory sales price disclosure and outlines penalties. We’ve seen legislation like this before. It’s nothing new. The other, HB 182, relates to a detailed study of the effects that mandatory sales price disclosure would have on Texas’ economy. HB 182 winds up being the much more compelling of the two bills, and Bernal hopes it holds the power to bridge the aisle and bring our understanding of the issue into sharper focus.

We spoke with Rep. Bernal about the proposed legislation and the change he ultimately hopes to bring. It’s a bit of a long read, but in our opinion, worth your time.

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2017-property-taxes-by-state-blue-vs-red-image.png

Texas rises to the top again — this time, when it comes to high taxes.  According to a new study by WalletHub, Texas ranks sixth-highest for real estate taxes in the country. It’s no wonder then, that more than 60 tax-related bills sit before the Texas legislature now.

Worth noting: the WalletHub study cites Republican states as having lower overall property taxes when compared to their blue counterparts. So it comes as no surprise that much of the legislation aimed at decreasing Texans’ property tax burden originates from Republicans.

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Report Cover Page 1

On November 29 I read a story in the Fort Worth Star-Telegram about a bill before the Texas Legislature (SB 2) to stanch the tax increases felt across the state by homeowners. I decided to read further and downloaded the 90-page interim report by the Senate Select Committee on Property Tax Reform & Relief that’s the impetus behind the SB 2 bill mentioned by the Star-Telegram.

Gosh, but property taxation in Texas is a huge CF.

I’ll begin with the flaming pink elephant in the room: Nowhere does this report recommend or even acknowledge that non-disclosure of real estate transaction sales prices is a big part of the problem.  As I’ve written ad nauseum, without accurate data on actual property sale prices, no Central Appraisal District (CAD) can make the most accurate valuations of property.  I say this system favors the wealthy because lower-priced properties are appraised with more accuracy.  Looking as I do at multi-million dollar properties for sale in Dallas, I can tell you it’s the RARE property that’s actually appraised at anything near its asking price.  I can also tell you it’s overwhelmingly these same people who hire tax consultants to plead their case with the CAD for lower valuations at the same time their home is listed for millions more than the assessed value.  It’s such a time-worn tactic of the wealthy, it’s even presidential.

That said, the system is also opaque, seemingly by design.

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Sold and For Sale Signs

As if the doom and gloom from the almost-over election isn’t bad enough, the city of Dallas has an economic crisis brewing that will most likely mean higher property taxes in the future. How would that affect our local real estate market? I was speaking to a prominent agent last week about the sticker shock our property taxes give most transplants even with the lack of a state income tax.

“These California buyers are starting to look at our property taxes and think twice about our so-called affordable living,” she said.

Last Thursday, Mayor Mike Rawlings was in Austin, sitting before the Texas Pension Review Board. He was pretty doom and gloom over unfunded liabilities in the Dallas Police and Fire Pension Fund that have also send our bond rating down, making it more expensive for us to borrow money. The fund was, he says, ripped off by a “Bernie Madoff scheme” in which fund members guaranteed themselves 8- to 10-percent returns on their investments, then took the money and ran. Of course, the police elected their board members and city councilmen from years past sat on the board.

Now the pension board wants the city to cough up $1.1 Billion (with a “B”) to replenish the police fund.

If we do that, Mayor Rawlings says the city would have no choice but to increase its current property tax rate by 130 percent to cover the difference. (more…)

penny

Some media is spreading news that the Dallas City Council is raising taxes in it’s new budget, which they will dissect Wednesday around the horseshoe.

But that is not entirely accurate, says Councilwoman Jennifer Gates: they are actually lowering our tax rate, by about a penny.

But you will pay more in taxes, because higher property values that will be born largely by middle class homeowners north of the Trinity, have made the city flush with about $66 million more in cash.

Some wanted to give it a bit back to the taxpayers. The City Manager proposed lowering the rate by 1.5 cents, Phillip Kingston proposed keeping the current tax rate, and Jennifer Gates proposed a two cent reduction. In the spirit of compromise, property owners get to pay one penny less with a tax rate of 78 cents per $100 valuation of your property. Which is one cent lower than what we were paying, 797 cents.

The problem is, the city is in dire need of money even with that extra $66 million. Most of the council, and I think perhaps most residents, want our police and firefighters to get raises and salaries that keep them in Dallas and protecting us.

But there are other issues, lots of issues: Robert Wilonsky has dissected the bad news.

1474393995-Where-Dallas-Spends-Its-Money

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lowes

The next time you walk into Lowe’s and they ask if they can help you, you might say, “Yeah, pay your fair share.”

Big-box retailers are trying a new-fangled strategy to lower their property taxes, and in some states, it is working.

It’s called the “dark-store” strategy, borrowing a commercial real estate term that means a vacated building that has “gone dark”. This strategy has been used successfully used by some stores to cut local property taxes in Michigan and other states.

Now, it is being tested in at least four Texas counties. That’s where Lowe’s home improvement stores are challenging tax bills. Their arguments are that the property should be valued as if the buildings sat empty.

But they are not: the stores in Bexar, Harris, Hunt, and Taylor counties, are wide open.

Confusing? It’s a way to bully the tax authorities with the store’s sheer size. Hey, they argue: this building is big (and cheap) and it would be really hard to fill if we left. So if you want us to stay and pay something, then lower our taxes.

We haven’t seen this in North Texas thus far, but you know how good news travels fast in the business world.

If these stores are granted huge tax deductions, guess who would be forced to cough up the difference?

Homeowners.

“I do think that this is something that needs to be watched,” says our Tax Doctor Rob Wheelock.

Property taxes are going to be a big topic in Texas 2017.

“Next year the Texas lawmakers, lead by State Senator Paul Bettencourt, will be taking up property tax reform in hopes of closing some of the current loop holes,” says Rob. “I can’t blame any property owner, residential or commercial,  for keeping a watchful eye on their values and protesting if they believe that the valuations is too high.”

Especially if giants like Lowe’s and Home Depot start ditching their fair share. (more…)

Dallas ISD trustees failed Thursday to get a supermajority to agree to place a 13-cents property tax increase on the November ballot. (Photo by Erik Hersman/Flickr)

Dallas ISD trustees failed Thursday to get a supermajority to agree to place a 13-cents property tax increase on the November ballot. (Photo by Erik Hersman/Flickr)

Since I write for a real estate publication, I get the, uh, benefit of hearing a lot about property taxes and how people feel about them.

It’s because of that I can feel pretty confident when I say that this may not have been the year to try a 13-cent property tax increase, even if Dallas ISD has one of the lowest rates in the Dallas-Fort Worth area.

Now, my reasons for saying that are completely different than some of the trustees who voted against the tax last night, and which you can read about here, here and here. But for now, let me say this: We cannot fund pre-K expansion and two years of college on eight campuses without some kind of investment. I still absolutely think that every single thing on the original measure was important and worthy of the extra taxation, and if I had been allowed, I would’ve voted for all three measures.

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